A judge at the U.S. Labor Department this month refused to sign off on a settlement between Wells Fargo & Co. and a whistleblower, calling the scope of would-be protection for bank officials and affiliates too broad.
The administrative law judge, Steven Berlin, told the lawyers in the whistleblower retaliation case to more narrowly tailor the settlement language. Berlin said the proposed resolution “essentially releases certain persons and entities from all claims existing at any time” up to the settlement date.
“Approval of the parties’ agreement requires that any release or waiver of claims be knowing and voluntary. I find that [Claudia Ponce de Leon] almost certainly has no idea whom she is releasing by signing this agreement,” Berlin, based in San Francisco, wrote in an order dated March 5.
Wells Fargo, represented by Gibson, Dunn & Crutcher, and the whistleblower, Claudia Ponce de Leon, tentatively reached a settlement in January. The bank had appealed an order last year that awarded Ponce de Leon $577,000 in back wages, damages and legal fees over her claims that the bank fired her for raising concerns about colleagues opening accounts without customers’ knowledge.
Wells Fargo in recent months has moved to resolve at least several other whistleblower cases tied to the fake-accounts scandal. In 2016, the bank reached a $185 million settlement with federal regulators and the Los Angeles city attorney to resolve claims tied to the unauthorized account openings—a widespread practice that, the Consumer Financial Protection Bureau said, was driven by aggressive sales goals and a drive to receive bonuses.
Gibson Dunn partner Karl Nelson in Dallas, a lawyer for Wells Fargo, was not immediately reached for comment Tuesday.
Yosef Peretz, the San Francisco-based whistleblower lawyer who represented Ponce de Leon in the settlement, said that “although the comments of the judge are substantive, it’s a procedural issue.”
“I expect the new agreement to be submitted soon, and I expect it to be confirmed,” Peretz said.
Berlin said Ponce de Leon’s settlement released from claims “many thousands of employees” at Wells Fargo. “I am certain that even Wells Fargo has no idea how many people or entities are being released or who they are,” the judge wrote.
Berlin, in his order, said the settlement even would have released him from claims.
“An interesting example involves the administrative law judge personally,” Berlin wrote in the order, posted below. “[Ponce de Leon] most likely has no idea that she is releasing me personally—not just once, but twice—from all claims, known or unknown, arising out of events at any time from the beginning of time to the date of the parties’ agreement.”
Berlin, a Labor Department administrative law judge for 10 years, said he represented Wells Fargo in the 1990s—a history, he wrote, that has “the effect of extending to me [Ponce de Leon’s] release of all claims.”
Also, Berlin was an associate at Morrison & Foerster when the firm represented Crocker National Bank, which was acquired by Wells Fargo.
“Crocker is therefore a likely former affiliated company of Wells,” Berlin wrote. “[Ponce de Leon] thus is releasing me for a second and separate reason. I am certain that [Ponce de Leon] had no knowledge of this when she signed the settlement agreement.”
Berlin left Morrison & Foerster in 1980 to work at the U.S. Department of Justice. In 1984, he joined Littler Mendelson, where he was a partner until 2000, according to his LinkedIn profile.
In addition to Ponce de Leon’s case, Berlin is presiding over the Labor Department’s ongoing pay equity investigation of Google Inc.